migrant workers remittances in bangladesh.pdf

MAKING BANGLADESH A LEADING MANPOWER

EXPORTER: CHASING A DREAM OF US $ 30 BILLION

ANNUAL MIGRANT REMITTANCES BY 2015

A Project Sponsored by Royal Danish Embassy in Dhaka

Project Team

Professor Sougata Ray (Project Director) Professor Anup Kumar Sinha Professor Shekhar Chaudhuri

INDIAN INSTITUTE OF MANAGEMENT CALCUTTA

INDIA

September 2007

MAKING BANGLADESH A LEADING MANPOWER EXPORTER

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Preface and Acknowledgements

With the rapid progress of globalization in the recent decades, the cross border movement of skilled and the unskilled labour from developing to developed countries has resulted in significant foreign exchange inflow to the developing countries through remittances of foreign exchange by their migrant citizens. Recognizing the potential development impact that can be made in this sector for countries like Bangladesh having abundant supply of human resources, the Royal Danish Embassy in Dhaka initiated and sponsored this study to look into possible strategic interventions that could help Bangladesh achieve annual remittances of US $ 30 billion by 2015. This study report is prepared by a core team comprising of Sougata Ray, Anup Kumar Sinha and Shekhar Chaudhuri, Professors at Indian Institute of Management Calcutta, India. The authors are grateful to the Royal Danish Embassy in Dhaka, Bangladesh for initiating and funding this research. We owe special thanks to some key personnel of Royal Danish Embassy, intimately involved with this study, namely Amarnath Reddy who conceived and initiated this project, rubbed his infectious enthusiasm and shared his precious ideas generously, Ib Albertsen and Farah Nayer Zabeen who later guided this project to its logical conclusion with their continuous follow up, encouragement and support. The production of this report has been a team effort involving a number of associates. Our research team comprising of Sugato Sarkar, Nisha Mehroon, Tathagata Lahiri, Chanchal Chakrabarti, Sumit Somani, and Avishek Chandra all worked tirelessly and made important contributions to the data collection, processing, analysis and presentation. Sugato Sarkar has been associated through out the duration of the study and made significant contributions in coordinating with all the team members, collating the relevant analyses in the presentable form, and assisting the authors in drafting the document. Nahid Ahmed, Proprietor of ValuePLUS Research and Consulting, Dhaka, Bangladesh needs special mention not only for his contributions in providing vital information and analysis pertaining to supply side dynamics of manpower export industry in Bangladesh but also for sharing the same passion and excitement for this research throughout. Some of our students such as Arijit Das and Sathyajit Gubi, Vikram Sunil Deshpande and Saurabh Pande, have provided valuable support in computation, formatting the document and creating visuals to make the report more reader friendly. The participants of the Top Management Programme from Bangladesh at Indian Institute of Management Calcutta, particularly Abdul Alim of S.A. Trading and Ahmadullah Mia, of Dhaka Ahsania Mission, Bangladesh, Anwar Hossain, Dean of School of Business, American International University and Mr. Zafrul Karim, Registrar of Presidency University, Dhaka made this report significantly richer by sharing their ideas and insights. Many other Bangladeshis, residing in Bangladesh as well as abroad, some are involved with manpower exports from Bangladesh in various capacities including some office bearers and members of BAIRA, have shared their views and provided valuable insights on the



subject. Without naming them specifically, as the list is quite long, we would like to thank them all. The team also gratefully acknowledges suggestions, insights and comments from a large number of people across the globe, too many to be mentioned individually, some of whom are affiliated to well known organizations such as Department for International Development (DFID), International Organization of Migration (IOM), International Labour Organization (ILO), International Monetary Fund (IMF), Organisation for Economic Cooperation and Development (OECD),World Bank, World Trade Organization (WTO), United Nations (UN), Directorate General for Italians Abroad and Migration Policies, American Staffing Association (ASA), Japanese Staffing Association (JSA), Manchester University, Japan Institute of Labour Policy and Training, Adeco Corporation, Manpower Inc., UK and India, Team Lease, etc.; some are accomplished non-resident Bangladeshi, Indian, Pakistani and Filipino professionals and businessmen and many more are not so fortunate migrants from Asia, Africa and Latin America toiling hard in the foreign soil to have the both ends meet. They were generous and enthusiastic in meeting, speaking, discussing and even exchanging mails and contributing meaningfully in development of the report. The report takes a long term strategic view of a sector influenced by myriad dynamically evolving factors not amenable to any forecasting methods. The future projections made in this report should be interpreted as being indicative of likely trends assuming a continuation of past patterns and likely acceleration of certain trends, rather than precise forecasts of what will inevitably happen. They should be regarded as a ballpark estimates for debates and discussions and should be used in conjunction with a variety of other sources of information and intelligence. Given the vastness and sensitivity of the subject we have deliberately guarded against being too specific in the strategy / policy recommendations. Specific detailed plan of actions on each of the strategy recommendations made in the report need to be worked out by teams of people involved in human resource development, deployment, management and export in Bangladesh drawing from multiple stakeholders Government, Industry, NGO, Education and Civil Society who have developed deep understanding and insights into the finer nuances and have the passions to drive the execution. During the course of this research, which has taken away an important year from each of our life, the authors have developed a firm conviction on the potential of this sector and recommended strategic road map for Bangladesh. The real satisfaction would accrue to us in seeing the dream being realized by Bangladesh. The authors will be more than happy to extend any help in this regard in the future. Finally, we wish thank our Institute to allow us to work on such an important research project. However, the opinions expressed in this report are those of the authors and do not necessarily reflect the views of Indian Institute of Management Calcutta.

Sougata Ray Anup Kumar Sinha Shekhar Chaudhuri



TABLE OF CONTENT

ABSTRACT................................................................................................................... 9 I. INTRODUCTION & OVERVIEW....................................................................... 12 II. EXPORT OF MANPOWER AND MIGRANT REMITTANCES: AN

ALTERNATIVE DEVELOPMENT STRATEGY............................................ 15The Changing World of Jobs ........................................................................................ 16The Impact of Increasing International Migration........................................................ 17Moral Outcomes, Country Risk and Government Policy ............................................. 18Wages, Skills and Remittances ..................................................................................... 19The Economic Impact of Remittances.......................................................................... 20The Macro Effects......................................................................................................... 21The Micro Effects ......................................................................................................... 22The Persistence of Unofficial Channels........................................................................ 23The Migration Transaction ........................................................................................... 25Some Challenges for Adopting a Strategic Approach to Remittance Flows ................ 27The Scope of Governments Role................................................................................. 28Concluding Remarks..................................................................................................... 30 III. OVERSEAS MANPOWER INDUSTRY IN BANGLADESH ........................ 31Global Bangladeshi Diaspora ....................................................................................... 34Migrant Remittances to Bangladesh ............................................................................. 35Analysis of Remittances Globally ................................................................................ 35Recent trends in Asian labour migration ...................................................................... 41Global Level Issues in Manpower Export .................................................................... 42Performance of the manpower export industry of Bangladesh..................................... 45Types of Bangladeshi migrant workers ........................................................................ 45Destination countries of Bangladeshi overseas workers............................................... 46Major Occupations of Bangladeshi overseas workers .................................................. 46Categories of overseas employment ............................................................................. 49Rewarding Job Categories ............................................................................................ 50Comparison of salary structures.................................................................................... 65Top remittance sources for Bangladesh........................................................................ 56Cost of overseas employment ....................................................................................... 57Issues of Bangladeshi Migrant Labor ........................................................................... 60 IV. WHICH COUNTRY TO TARGET? COUNTRY ATTRACTIVENESS

INDEX. .................................................................................................................. 63Country Attractiveness Index ....................................................................................... 65Dimensions of Attractiveness ....................................................................................... 67Clustering of Countries in terms of Attractiveness....................................................... 72 V. OCCUPATIONS IN DEMAND GLOBALLY.................................................... 89Trends in the age composition of those employed...................................................... 106



Trends in employment rates by education level ......................................................... 104 Occupations with the most openings .......................................................................... 108 VI. NATIONS COMPETING IN HUMAN RESOURCE EXPORT MARKET 121 Philippines................................................................................................................... 131 Pakistan ....................................................................................................................... 136 India ............................................................................................................................ 138 Sri Lanka..................................................................................................................... 140 VII. HUMAN RESOURCES SUPPLY DYNAMICS IN BANGLADESH ......... 142 Supply of Manpower in Bangladesh........................................................................... 147 Strengths and weaknesses of Bangladeshi workers .................................................... 151 Prioritizing Occupations for Manpower Export from Bangladesh ............................. 151 Development of Manpower in Bangladesh................................................................. 152 The Way Forward ....................................................................................................... 156 VIII. STRATEGY FOR CAPITALIZING THE GLOBAL OPPORTUNITY... 160 Strategy for the Future ................................................................................................ 160 Change Mix of Destination Countries ........................................................................ 163 Increase Penetration and Capture Greater Market Share in Destination Countries.... 165 Change the Mix of Skills - Moving up the Skill Ladder ............................................ 165 Making Manpower Export an Organised Industry ..................................................... 172 Improve Talent Supply ............................................................................................... 183 Change the Mix of the Remitting Channels................................................................ 186 Building Brand Bangladesh ........................................................................................ 189 Executing the Strategy Agenda for Different Stakeholders..................................... 190 The Governments Overarching Role......................................................................... 191 Manpower Export from Bangladesh: Perspective on NGOs Role ............................ 194 APPENDIX 1: Country Attractiveness Index Methodology ................................ 200 APPENDIX 2: Country Analysis............................................................................. 206 APPENDIX 3: Training Institutions....................................................................... 271 APPENDIX 4: Accreditation Agencies ................................................................... 287 APPENDIX 5: Model Staffing Companies ............................................................. 290 APPENDIX 6: Business Plans.................................................................................. 314 BIBLIOGRAPHY..................................................................................................... 372



LIST OF TABLES Table 3.1: Number of Bangladesh immigrants in industrialized countries ...................... 34 Table 3.2: Global flows of international migrant remittances ($ million)........................ 37 Table 3.3: Top Remittances Sending Countries ($ million) ............................................. 38 Table 3.4: Top 15 Remittances Receiving Countries ($ million) ..................................... 44 Table 3.5: Different categories of Bangladeshi migrant workers ..................................... 45 Table 3.6: Overseas Employment by Profession ............................................................. 46 Table 3.7: Destination countries for Bangladeshi migrant workers ................................. 47 Table 3.8: Country wise break up of major Occupations of Bangladeshi workers migrated in 2005................................................................................................................................... 48 Table 3.9: Job Type wise grouping of Bangladeshi overseas workers in 2005................ 49 Table 3.10: Percentage of pre-departure occupation ....................................................... 49 Table 3.11: Destination countries with number of workers wanted ................................. 50 Table 3.12: Comparison of skills of migrant workers between destinations................... 51 Table 3.13: Percentage distribution in the advertisement................................................. 51 Table 3.14: Rewarding job categories .............................................................................. 52 Table 3.15: Average monthly salaries of skilled job opportunities ................................. 52 Table 3.16: Average monthly salaries of un-skilled job opportunities............................. 53 Table 3.17: Sources of Remittances to Bangladesh (in million US$) .............................. 57 Table 3.18: Estimated Cost of migration .......................................................................... 58 Table 3.19: Size of Remittances Market in Bangladesh ................................................... 59 Table 4.1: The Demographic Implosion in the Developed World.................................... 64 Table 4.2: Immigrants as % of Total Labour Force in Leading Migrant Dependent Countries........................................................................................................................................... 64 Table 4.3: Ranking of Countries on Country Attractiveness Index.................................. 66 Table 4.4: Cluster of Countries......................................................................................... 74 Table 4.5: Top Remitting Countries and Flow of Bangladeshi Migrants......................... 81 Table 4.6: How do the countries stack up in terms of individual earning potential ......... 84 Table 4.7: How do the countries stack up in terms of individual remitting potential....... 86 Table 5.1: Key Occupations in Demand from Bangladesh in 2005 ................................. 89 Table 5.2: Annual Salary and Remittance Potentials for Occupations in Semi Skilled and Unskilled Category ........................................................................................................... 91 Table 5.3: Annual Salary and Remittance Potentials for Occupations in Skilled Category 92 Table 5.3: Annual Salary and Remittance Potentials for Occupations in Skilled Category92 Table 5.4: Annual Salary and Remittance Potentials for Occupations in High Skilled Category........................................................................................................................................... 94 Table 5.5: Occupation in Demand Select Asia-Pacific Countries ................................. 98 Table 5.6: Occupation in Demand Middle East Countries ............................................ 99 Table 5.7: Occupation in Demand Select European Countries.................................... 100 Table 5.8: Occupation in Demand North American Countries.................................... 103 Table 5.9: Occupation in Demand Oceania Countries................................................. 104 Table 5.10: Occupation with Expected Highest US Demand in 2014............................ 113 Table 5.11: Occupation with Moderate US Demand in 2014 in the US......................... 116 Table 5.12: Demand and Salary Data of Occupation to be Targeted in the US ............. 118



Table 5.13: Occupation in order of Expected Highest Additional Demand in the US 122 Table 6.1: Major Sources of Migrants to Leading Remitting Countries ........................ 125 Table 6.2: Major Migrant Workers Sending Countries Across Continents 127 Table 6.3: Average Annual Migrants Leaving for Jobs Abroad (in thousands) ............. 128 Table 6.4: Top 15 Remittances Receiving Countries ($ million) ................................... 128 Table 6.5: Skill-wise Listing of Major Source Countries ............................................... 130 Table 6.6: Profile of the Major Competitors................................................................... 132 Table 6.7: South Asian Competitors: Trends in Population, labour Force, Employment and Unemployment................................................................................................................ 135 Table 6.8: Deployment of OFWs.................................................................................... 137 Table 6.9: Major Destinations of OFWs......................................................................... 138 Table 6.10: Number of Pakistanis who proceeded abroad for Foreign Employment..... 141 Table 6.11: Country-wise Remittances Received from Abroad (million US $)............. 142 Table 6.12: Emigration for Employment from India ...................................................... 143 Table 6.13: Annual labour Outflows from India by Destination (2000-04) (%) ............ 143 Table 6.14: Sri Lanka: Foreign employment by country/gender 2000-2004.................. 145 Table 7.1: Occupation wise grouping of Bangladeshi overseas workers in 2005 .......... 146 Table 7.2: Country wise break up of major occupations of Bangladeshi migrant workers (2005)......................................................................................................................................... 147 Table 7.3: Job Categories of Bangladeshi Migrants ....................................................... 148 Table 7.4: Home District wise Job Seeker Registration ................................................ 149 Table 7.5: Annual Incomes of Migrants Households before Migration........................ 151 Table 7.6: Unemployed Youth labour (15-24 yrs) by Level of Education..................... 151 Table 8.1: Country-wise demand for skills can be met by Bangladesh ......................... 169



LIST OF FIGURES Figure 3.1 Remittance Flow to Developing Countries .................................................. 39 Figure 3.2 Remittance Payments 2005 .......................................................................... 41 Figure 3.3 Worker Remittances Flows to Latin America and the Caribbean................ 42 Figure 3.4 - Top five countries with the highest % of migrants in the countrys population43 Figure 3.5 Different categories of Bangladeshi migrant workers.................................. 47 Figure 3.6 - Percentages of demanding job categories ..................................................... 54 Figure 3.7 - Renewal options of job opportunities ........................................................... 55 Figure 3.8 Comparisons of salary structures relating to food cost bearers.................... 56 Figure 3.9 Growth comparison between Bangladesh and developing countries ........... 56 Figure 3.10 Growth comparison between number of migrant workers and remittance 58 Figure 4.1 Increase in Aging population across continents ........................................... 65 Figure 4.2 Attractive Countries in the World Map ....................................................... 69 Figure 4.3 Attractive Countries on Different Dimensions ............................................ 70 Figure 4.4 Average Dependency Ratio and Remittance 2005....................................... 77 Figure 4.5 Average Dependency Ratio and Remittance 2015....................................... 77 Figure 4.6 Average Unemployment Rate and Remittance 2005 ................................... 78 Figure 4.7 Average Unemployment Rate and Remittance 2015 ................................... 79 Figure 4.8 Average Crude Birth Rate and Remittance 2005 ......................................... 79 Figure 4.9 - Average Crude Birth Rate and Remittance 2015.......................................... 80 Figure 4.10 Average Population Density and Remittance 2015.................................... 80 Figure 4.11 GINI Index and Remittance 2015................................................................ 81 Figure 4.12 Average Dependency Ratio and Ease of Migration 2015 .......................... 82 Figure 4.13 Share of Bangladesh in Total Remittance Outflow.................................... 84 Figure 4.14 Projected Remittance Potential 2015.......................................................... 85 Figure 5.1a Skill Wise break up of Countries targeted by Bangladesh in 2005 ............ 92 Figure 5.1b - Skill Wise break up of Countries targeted by Bangladesh in 2005............. 93 Figure 5.2 Difference in Remittance Potential Welder and Taxi Driver .................... 97 Figure 5.3 - Difference in Remittance Potential Die Casting Machine Operator and Carpenter........................................................................................................................................... 98 Figure 5.4 - Difference in Remittance Potential Construction Worker and Cleaner House keeping.............................................................................................................................. 98 Figure 5.4 - Difference in Remittance Potential Bus Driver and Plumber .................... 99 Figure 5.5 Demand for Labour in the US .................................................................... 110 Figure 5.6 - Migrants Dominated Occupation in the US................................................ 111 Figure 5.7: The 10 industries with the largest employment Opportunities (2005-2014) 111 Figure 6.1 Global Services Location Index, 2005 ....................................................... 133 Figure 6.2 - Deployment of OFWs ................................................................................. 137 Figure 6.3 - Distribution of Remittances Received by India .......................................... 144 Figure 8.1 - Basic Model for Migrant Remittances ........................................................ 163 Figure 8.2: Seven Pronged Strategy................................................................................ 164 Figure 8.3: Direction of Change in Country Mix ........................................................... 164 Figure 8.4: Market Potential Matrix ............................................................................... 165 Figure 8.5: Mapping the Target Markets ........................................................................ 166 Figure 8.6 Share of Bangladesh in Total Remittances Outflow from Select Countries 167



Figure 8.6 Share of Bangladesh in Total Remittances Outflow from Select Countries 167 Figure 8.7: Direction of Change in Skill Composition ................................................... 168 Figure 8.8 - Flow Chart of Migration Process of a Typical Bangladeshi Migrant Worker 174 Figure 8.9 Suggested Human Resource Export Process in Bangladesh ...................... 177 Figure 8.10 - Structure of Overseas Staffing Services Forum ........................................ 180 Figure 8.11: Changing Mix of Remitting Channels........................................................ 188



ABSTRACT The impact of globalization on the world economy is becoming increasingly all-pervasive. Its positive impact is no longer confined to the developed countries. Even a developing country like Bangladesh, with its weak economy, is looking at globalization to strengthen its base. In the last decade cross border movement of people across nations, especially the movement of skilled and the unskilled labour from developing to developed countries has resulted in significant increases in the incomes of the former through remittances of foreign exchange by their overseas citizens. This phenomenon has given a boost to the economies of the developing nations. Bangladesh has an edge over many other developing countries in its abundance of human resources. This has resulted in its emergence as a key global player as a source country for the supply of manpower to the developed nations. The report sets out to:

Establish the importance of developing the overseas manpower industry as one of the growth drivers of Bangladeshs economy.

Highlight the untapped global markets and occupational categories which Bangladesh can explore.

Suggest seven pronged strategies to exploit the global opportunities in manpower export and achieve manifold increase in the flow of migrant remittances to Bangladesh.

Identify and spell out the role of the government in executing the winning strategies that it needs to adopt to become the leading supplier of manpower resources globally.

Bring into focus the potential areas where the government needs to involve the NGOs and private investors for the full exploitation of the opportunity.

The report makes the following salient points:

1. International migration yields two fold benefits to the source country. The migrants earn more resulting in their economic betterment. They also remit a part of their earnings to their families in their home countries resulting in their well being and as a result strengthening the nations economy. These potential benefits have prompted many developing nations to integrate migration and labour export policies into their overall development strategies. The significance of international migration to national economies has also prompted international organizations like the World Bank, ILO and the UN to undertake extensive research in these areas and suggest policy frameworks for emigration of people and on the ensuing remittances. 2. The forces of globalization are contributing to greater integration of labour markets. Emerging technologies call for new skills in new growth poles and emerging demographic patterns call for old skills in new locations. These developments together mean that a much wider variety of people can potentially migrate. This would benefit both the source country as well as the host nation.



3. Bangladesh is emerging as a major beneficiary of this phenomenon; hence it is imperative for it in the coming years to gainfully leverage the growing opportunities in the international labour markets. Bangladesh has certain inherent advantages such as: availability of abundant and cheap talent; good reputation of its overseas workers; its historical presence and strong positions in some countries; great willingness of its citizens to migrate; growing importance of manpower export in the eyes of the government and the willingness of NGOs and other private sector players to play significant roles. 4. The Government of Bangladesh needs to make a paradigm shift in its overseas employment strategy. It needs to collaborate extensively with all the stakeholdersthe industry players, educational and training institutions, banking and micro-finance institutions, NGOs and a strong eclectic industry association or forum to bring forth this change. They need to recognize the significance of overseas remittances in alleviating poverty. Together they have to spur investment in education and training, ensure decent and quality employment for the migrant Bangladeshis, and create organizational structures and processes that would professionalize the system of overseas employment to enable the Bangladeshi migrants to compete in the ever-expanding and highly competitive global market. 5. The government has an overarching role to play if the full economic potential of migration is to be realized. The report proposes three key roles that the government needs to play: that of a legislator, a regulator and an enabler. 6. First as a regulator, the government needs to enact or suitably amend the laws to grant industry status to overseas manpower export so that agencies involved can legally deal with foreign currencies and to prevent illegal human trafficking and human rights violation and bring transparency in the migration process, thereby protect its citizens from opportunistic exploitationonly then a sustained growth of the economy through migration and remittances is possible. The Government of Bangladesh also needs to work directly in two distinct areas. It should ensure that the education sector encompassing schools, technical institutes and universities are in sync with the global labour market trends and demands so that the citizens have relevant and quality educational and technical backgrounds to avail of these opportunities. Secondly, it should have a good networking with the governments and the organizations of the countries where the Bangladeshis are likely to work. Both these areas are important to ensure long term benefits and to establish a good reputation in the global market. 7. The process of migration and flow of remittances would involve many credit institutions like banks and micro finance organizations. These credit organizations will have to provide incentives to the migrants for remittances to be transferred officially and thereby canalize remittances into the national market for productive investments. These institutions will have to be carefully regulated so that the procedures in the migration transaction are devoid of ambiguities, are easy to use and free from fraud and inaccurate information.



8. The government needs to play the overall role of an enabler in the migration process and also in the inducement of the migrants to remit funds back home. It must also ensure the optimal use of these funds. 9. The government has to provide legitimacy to the formation of an overseas staffing services forumthe core hub around which the entire development strategy of promoting official migration and remittances will revolve. 10. A number of different types of organizations will have to be involved to form partnership with the government. The civil society organizations like the NGOs working in the rural areas have an essential role to play in creating awareness regarding migration opportunities among the potential migrant households. Other organizations like self help groups can take up the task of evolving proper framework and creating opportunities for the best use of the remitted funds. By extending such services these organizations work as intermediaries between the government and the people. People have a better understanding of the government policies. These organizations thus form a strong bulwark in the national development strategy. 11. The private sector companies or the businesses need to play an integral part in the training, funding migrants, identifying jobs, and in forming liaison with the staffing companies at home and abroad. They need to come forward and make use of the commercial opportunities present by creating additional facilities like vocational training centres, providing staffing services, and make financial intermediation like setting up micro finance institutions. 12. Bangladesh has a strong foundation. What it needs to do is to frame policies, create partnerships, allow responsible private entrepreneurship to flourish and inject professionalism in the management of the manpower export. All these can significantly improve the returns to the country from migration. There is no doubt about the gainsall it needs to do is to learn to reap maximum benefits out of this opportunity.



I. Introduction and Overview The rapidly changing global economy is driven by innovative technologies and integrating markets. There has been a tremendous spurt in the growth of international trade in goods and services along with a significant rise in the international financial flows. Movement of people within and across nations is on the rise. In fact one of the biggest implications of a rapidly changing global economy has been on the impact on the labour market. In the last decade, cross border movement of people and remittances outflow from a large number of developed countries and remittances inflows into a number of developing countries has been increasing steadily. Since 1980 the stock of migrants has started moving two steps ahead of the average growth rate in the world population. According to the United Nations Report of 2006, about 3 per cent of the world population is in transit. Sizable portions of the people living outside their countries of birth send back regularly a part of their income home. Migrant remittances have made it possible to bring about direct, immediate and far-reaching benefits both to the families and the countries of the migrants. In fact the migrant workers provide a constant source of incomean amount larger and more predictable than the official development assistance, foreign direct investment and other private inflows. The emergence of remittances as a new strategy for poverty alleviation in developing countries has spurred multilateral institutions, international organizations, foundations, universities and national governments, including the Asian Development Bank (ADB), Inter-American Development Bank (IADB), International Monetary Fund (IMF), World Bank, and the United Nations among others to seriously study, identify and implement measures on how these inflows could be maximized and then harnessed for the development of the migrants countries of origin. There are three major positive effects of migration. Expatriates who remain abroad contribute money via worker remittances. Returning migrants, in particular, bring back their skills and work experience from abroad, thus boosting productivity of the local economy. Migrants may also invest capital in entrepreneurial ventures that facilitate transfer of knowledge or technology to the developing countries and boost productivity and economic development. While all three are equally important for the development of Bangladesh, this report focuses only on the first major impact of migration, i.e., migrant remittances. The total inflow of remittances to recipient countries only through official channels is estimated to be US $ 268 billion in 2006. Our analysis suggests that in the next decade remittance will continue to be the driving force of the developing economies with the reduction in remittance costs and expanding networks in the remittance industry, greater movement of temporary workers and resultant growth in the migrant stock and incomes around the world. Going by the past decades trend and in the light of more multilateral and bilateral discussions, the global flow of remittances will expand rather rapidly to an estimated amount of US $ 400 billion by 2010 and cross US $ 600 billion mark by 2015. In the recent years progressive governments from both migrant sending as well as receiving countries have started adopting a strategic approach towards migration management. It is believed that with the implementation of GATS Mode 4 in the next



decade there will be a much greater freedom of movement of temporary workers, at least in some areas, among the member countries of WTO. Hence, it is likely that there will be a cumulative temporary and permanent migration of about 80-100 million labourers around the globe. This trend holds out a remarkable promise for the labour exporting nations like Bangladesh, if it works out and executes an effective strategy of developing, nurturing and exporting human resources in the coming years. Bangladesh is an important supplier of human resourcesin fact in some developed destination countries it is a major supplier and accounts for about 3 per cent of the global remittance income. More than four million Bangladeshis work abroad and over a quarter million Bangladeshis join the migrant work force every year. Currently it receives an annual remittance amount of US $4.8 billion through official and an additional amount of US $3.0-4.0 billion through unofficial channels. The countrys man power export industry is poised for a dramatic growth. To date this industry has played a major role in reducing the balance of payments problems by generating valuable foreign exchange earnings in the form of remittances. Millions of Bangladeshis have benefited directly from the industry. Recognizing the potential development impact that can be made in this sector, the Royal Danish Embassy in Dhaka has sponsored this study to look into possible strategic interventions that can help Bangladesh achieve annual remittances of US $ 30 billion by 2015. Therefore, the central question that we have addressed in this report is: How can Bangladesh achieve an annual remittance level of US $ 30.0 billion by 2015? This report attempts to outline a possible path and set the agenda for all the important stakeholders in the overseas manpower industry in Bangladesh so that this ambitious target becomes a reality. The following is a brief chapter-wise outline of the report: Chapters II & III: An analysis of the current situation providing the economic

justification for following the given strategy taking into account the social and the developmental issues that are important for the future well being of the country.

Chapter IV presents the analysis of the global labour market dynamics highlighting the trends towards greater integration in labour markets and identifies and ranks the potential labour receiving countries in terms of attractiveness to the Bangladesh manpower export industry.

Chapter V presents a trend analysis of the occupations and skills in demand globally and an assessment of the size of the present and the future global demand in the professional, skilled, semiskilled and unskilled categories.

Chapter VI discusses the relative position of Bangladesh as a labour exporting country vis--vis other major competing countries, and identifies its areas of competitive advantages and disadvantages.

Chapter VII deals with the dynamics of the supply side of the labour market in Bangladesh and identifies areas of improvement in education and training infrastructure in the country and recommends various governmental and non governmental initiatives to be taken to increase the demand for Bangladeshi migrant workers in the international market.



Chapter VIII presents a medium and long term strategic road map for diversifying the portfolio of target markets and occupational categories through major transformation of the management process, remittance transfer mechanisms, redefinition of the roles of the existing stakeholders, and induction of new stakeholders in the manpower export industry.



II. Export of Manpower and Migrant Remittances: An Alternative Development Strategy

The rapidly changing global economy is driven by innovative technologies and integrating markets. There has been a tremendous spurt in the growth of international trade in goods and services along with a significant rise in international financial flows. Movement of people and international migration is also on the rise, although this issue has received much less attention than warranted amongst economic analysts and policy makers. Yet it may be argued that one of the biggest implications of a rapidly changing global economy is about labour market impacts. There are discernable changes in the wages (both absolute and relative) in different sectors and different economies, labour contracts are becoming much more flexible, and jobs are being relocated across the world. Not all jobs entail tasks that can be done virtually by the help of information and communication technologies. There is substantial misalignment between labour demand and labour supply in local labour markets. Changing production structures and technologies, demographic differentials, and specific sector-wise growth rates in labour demand and supply drives this. Labour arbitrage is a distinct possibility. Indeed, the next phase of globalization is likely to be marked by an emerging global labour market and societies will have to grapple with many thorny problems of labour market integration. This chapter focuses on an important dimension of labour movement, namely international migration. This process can have repercussions on both the receiving country as well as the country of origin. Migration can be at various skill levels too. From the point of view of a developing country, one potential benefit is the receipt of financial remittances from the nations migrants living and working abroad. This can be a very important building block of growth and development. Bangladesh have had a long experience of emigration of workers, both for short-term employment as well as permanent resettling. For a developing country like Bangladesh, migration and remittances have been growing rapidly and consistently. The process of migration and the receipt of remittances are however, fraught with their share of difficulties. These pose quite a few policy challenges. A more focused approach could ensure a much larger and sustained economic benefit to Bangladesh. Section 2 discusses the changing economic context of migration in the emerging global economy. Section 3 examines the economic and developmental implications of international emigration for a developing country like Bangladesh. Section 4 analyses the macro and micro economic effects of international remittances. It is estimated that about half of international remittances remitted by migrant workers across the world are done through unofficial channels. Section 5 examines the reasons why this channel operates the way it does. Section 6 looks at the entire migration transaction from the potential migrant to the act of emigration and finally to the receipt of financial remittance, and the challenges it poses for policy makers wanting to avail of the process as a strategic tool of development. Section 7 puts together a set of policy priorities and institutional initiatives that the Government of Bangladesh could consider for sustaining the gains from



international emigration of its citizens. Section 8 remarks on the scope and importance of government intervention. Section 9 contains some concluding observations. The Changing World of Jobs The growth of international trade and investments has reduced cross border barriers quite dramatically. Market integration has been pushed with the advent of the WTO. It is also expected that the future increases in global trade and investments will be large with positive economic gains accruing to all the participating countries. Compared to this growth and reduction of transaction costs of trade, the barriers for movement of labour remain high. There is still a hangover from the past about the necessity of protecting local labour markets. However, the nature of jobs, their international locations and the labour demand relative to locally available supply have all been changing with a breath taking speed. Cutting edge technical jobs require high-end education and skills. The demand for high skilled personnel is increasing at a rapid rate relative to supply. Most of these jobs are located in developed high-income countries. People with requisite skills are converging to the destination of high-income economies to avail of these opportunities. It does not matter where one is from. If one has the skills and the education, the job is available. For instance the IT clusters like the famous Silicon Valley, financial hubs like Wall Street, and all the major IT firms, investment banks and consulting firms employ people from all over the world, a large number of them coming from low-income countries including Bangladesh. Wages and remuneration in these sectors have increased at an astonishing pace. Many new hubs are coming up in new locations where there is a dense network of highly skilled people. Many developing low and medium income countries are pursuing successfully their own industrial modernization like the countries of East Asia and particularly China, thereby opening up new employment opportunities that require a different set of skills and discipline. These skills are important in sustaining productivity changes in manufacturing and related industrial activities. The creation of these jobs also calls for migration, although for most developing countries the migration is likely to be internal rather than international. Alongside this, jobs in activities that exhibit increasing costs (or diminishing returns) in the entire value chain of integrated production structures, are shifting to locations where semi-skilled people are abundant and the wage costs are low. These could be jobs in the low end of the information technology sector like the information technology enabled services (ITES) or the automotive ancillaries sector, and the whole movement of outsourcing and off-shoring jobs from high income countries to the low income countries. These sectors too provide opportunities of new employment with some rudimentary skills. As incomes rise in a country, the preference to see employment as the returns to investment in human capital becomes evident. Low skill jobs and tedious jobs are much less preferred than more skilled and hence more rewarding jobs. This situation is becoming clear in many high-income countries. The lack of voluntary supply of labour is compounded by the demographic changes that accompany long periods of sustained high incomes. Population growth rates in these countries had fallen much earlier, and hence the current population is aging very fast. This implies two distinct but interrelated



situations arising in the unskilled labour market (for instance, being a janitor) or in services where, (at least in terms of current technologies) virtual delivery is just not possible. Nursing is an example of such a service. The first implication is that there is a serious shortage of workers who are ready to accept such jobs in the local labour pool. The second is the demand for such jobs (with low local supply response) is likely to grow in the future as the demographic changes become more pronounced. In such situations the supply has to be forthcoming from external sources, namely immigration (temporary or otherwise) of labours from low-income countries. This area represents in the short to medium-term the biggest potential opportunity for migration from low-income countries. Over and above the nature of labour market changes discussed above, there are few countries where there is a genuine shortage of people compared to existing and emerging employment opportunities, independent of demographic changes or high investments in human capital. The countries of the Middle East and some other African countries would fit the description. However, in these economies, as development and integration with the world economy increases, the resulting future demand for jobs may actually decline as returns to human capital investments and development becomes more inclusive. High rates of economic growth driven by new technologies and emerging markets, combined with the international demographic pattern of aging, are leading to significant relocations of investments and employment. In the long haul, the demand for high skills will be the most important factor driving migration, but in the shorter duration of the next couple of decades the demand for specific skills and low-end skills will be setting the tempo for the increase in migration flows. In this context it may be prudent to note that many low-income countries particularly in Asia have abundant labour force. Most of these economies have surplus labour, especially in terms of the low and unskilled work force. Thus the total global supply of available jobs in high and medium income economies will be less than the number of people who would wish to avail of these opportunities and migrate. In other words, there will be competition for these jobs on a global scale. It is in this context that the low-income countries like Bangladesh need to adopt a clear set of enabling policies that will be an integral part of their overall development strategy. The gains from international migration are not only to be viewed as the outcome of a choice made by an individual economic agent. Instead they should be viewed as gains availed by society, through appropriate macro policies that ensure that the maximum number of individuals from that country stand to gain. The policies should also ensure that the costs of availing of these opportunities are minimized, and that the benefits are shared by society in terms of the positive externalities that migration can cause in a number of different ways, especially through financial remittances. The Impact of Increasing International Migration Increasing international migration from a low-income economy is driven by push factors such as the expected income that can be obtained in another economy where real wages are higher and the quality of life perceived to be better. The pull factors are primarily



driven by the changing pattern of employment opportunities and hence the derived demand for labour. Broadly, as discussed in the previous section, the job opportunities are in three segments high skill, knowledge intensive jobs, low or unskilled jobs, and finally jobs in selected services where some specific skills are necessary, such as in the area of nursing or paramedical support. An interesting feature of actual migration in the last four decades indicates that the growth in the number of international migrants has been high and constant. The growth in remittances from these migrants has however, grown at an increasing rate during the same period. This implies that the remittance per migrant is increasing. The developing countries receive about 70% of total global remittances. In many developing countries the remittances sent have become a significant source of foreign exchange earnings. This trend has, in turn, led to some serious research on migration issues and also led to the High Level Dialogue on International Migration and Development at the United Nations. A number of interesting issues are being revealed from recent research being carried out to know more about the phenomenon of international migration. One result is the fact that migration and remittances are concentrated among and within countries. In other words international migration affects some countries and some regions in countries more than others. International migration also affects men and women in different ways, implying the existence of significant gender issues. The core question that needs an answer is: How is international migration related to the process of development? The more we understand the emerging links between the two, the more confident we can be of designing policies to influence the impact of international migration in the migrant sending countries. Moral Outcomes, Country Risk and Government Policy With increased flows of migration from the country of origin, a number of concerns crop up. One such concern regards the migration of low or unskilled people many of whom could be illiterate, or just functionally literate without much knowledge about the entire transaction that entails migrating from ones home country to a new social environment. The scope of opportunistic behaviour is high in such situations. Unscrupulous recruiting agents can take job seekers for a ride by charging more than is warranted, providing incomplete and incorrect information about prospects and adopting illegal processes that can make the migrant vulnerable to prosecution under the law of the country of destination. Many such recruiting agents could work hand in glove with similar agents in the country of destination such that the migrating workers can be used as a cheap resource without rights and protection under the law. Exploitation of ignorant or vulnerable migrants is a well-known fact of life. It may be argued that migration is a private decision taken by an individual, and hence whatever is the outcome and consequences of that decision (positive or negative), the regulators and policy makers should refrain from intervening. This argument is not quite acceptable. There are two reasons for this. The first difficulty arises from a moral ethical standpoint. When ignorant people are duped and exploited by people not adhering to legal and moral norms, the least a government can do is to ensure that such cases become much less frequent in the future. This, in turn entails, not only having a position on



ensuring justice and rule of law, but also coordinating with the governments of country of destination of the migrant. This regulatory cooperation and the deterring of opportunistic behaviour through a set of laws governing migration are of great human consequence. The second reason why this argument for passivity is unacceptable is the more strategic reason as to the long-term consequences for the flow of migration from the country of origin. Illegal migration thwarts both the push and the pull factors driving migration in the long run. Rising risks increase the costs of migrating, and can reduce the flow. The collective upshot of a set of private decisions to migrate illegally (with or without fully comprehending the consequences) has an externality effect on the reputation and image of the country of origin. That may suffice to drastically reduce acceptance of migrants from a country where large illegal traffic is the norm rather than the exception. In the concern for insuring a minimal quality of the lives of migrants the International Labour Office (ILO) has developed the concept of decent work. Decent work is based on four distinct aspects of earning a livelihood. The first pertains to employment through which individuals not only earn their livelihood to meet basic human needs, but also use work to affirm their identity. Jobs should be voluntarily chosen and be productive in nature. The second aspect of decent work is about protection of rights at work. Every worker should enjoy a certain set of basic rights in the workplace determining the conditions of work, remuneration and leisure. These should be irrespective of the sector and type of employment, whether organized or informal, permanent or temporary, male or female, and non-discriminatory in every other way. Social protection is important too especially from the vulnerabilities of sickness, old age, accidents and other contingencies that a person out of employment is exposed to. Finally, there should be the possibility of social dialogue that ensures that employers and employees can resolve their differences, defend their rights, and promote future employment opportunities. Low-income countries that send out a significant number of low or unskilled migrants must take particular care in working with the ILO and ensuring that migrants from their own country are subject to decent work norms. Needless to add, the obligation to ensure this lies equally, if not more, on the part of the receiving country, where such violations are likely. This short digression on the concept and importance of decent work as propounded by the ILO is to re-emphasize the need to minimize the illegal flow of migrants. In this section the discussion so far was around the issues of migrants protection, the paramount importance on enabling and insisting on legal flows of migration and the necessity of the government of the country of origin taking a strategic policy position in these matters. We now turn to the impact of emigration on the country of origin. Wages, Skills and Remittances In low-income labour surplus economies, the emigration of low and unskilled workers reduces pressure on local labour markets for similar services. This is certainly a positive gain for the individuals who remain and for the country as a whole. Even if this does not produce instantaneous rise in local wages, the probability of getting a job locally improves. There are positive externalities too, as the outcome of migration can be a



reduced pressure on scare public goods and civic facilities. It may also reduce the cost of providing future public goods. The second positive impact pertains to the demand for skills that are required in getting jobs abroad. They could be wide ranging from basic education and language proficiency to more specific vocational skills. It could also raise the demand for higher education in technical fields like engineering or management. As education becomes more oriented to labour market outcomes, the demand for an improvement in the functional quality of educational services will also come about. Here again, a coordinating agency is required with the legitimacy derived from the government of the country of origin. This agency has to monitor and scan the global job opportunities that arise and the kind of skills they demand. It is important to grab opportunities fast and have local institutions that can be flexible enough to impart a variety of skills quickly at affordable costs. The third and arguably the most important positive and tangible impact is the flow of remittances from migrants incomes earned abroad. Migrants incomes are typically sent privately to their immediate or extended families. The augmented income of the household that receives the remittances is of obvious positive consequence. These flows of income not merely support higher consumption levels, but are also frequently used for buying of assets like land or farm implements, setting up a small business venture, ensuring education of children in the family, improving healthcare and acquiring human capital. Sometimes remittances are in kind like medicines, or food or general supplies in the event of an emergency. In other words this possibility is like a general insurance facility that can be relied upon. Finally, sometimes remittances can arrive in the form of specific purposes for a community like a village or a small rural town. For instance, a migrant may feel obliged to build a school in his native village where he grew up. He may have realized the hard way of the value of having a good school where others can get themselves educated. Migrants often reveal a social commitment to give back to their social roots. These commitments often result in activities that clearly go beyond the private benefits of a particular family or individual. In cases where a number of people have emigrated from a close knit neighbourhood, the remittances that flow in can be used by collective consent for community projects and improvements in the neighbourhood infrastructure. A part of private benefits are transferred to the community precisely because other similar contributions are forthcoming from neighbours. Remittances, while growing in countries such as Bangladesh, do not mean that all migrants are going away permanently. A lot of migration is temporary in nature even though while the migrant is away remittances are sent. The migrant may or may not return with adequate financial capital to start and sustain a small business as a means of livelihood, but he does certainly bring back a significant dose of experience and learning while living and working in unfamiliar social and cultural milieus. The next section will discuss the impact of remittances in greater detail. The above discussion on the possible varieties of positive economic impact that migration can bring about on the country of origin reiterates the need to receive the remittances through legal channels. It is estimated that globally, as well as in Bangladesh, only about



half the remittances are sent through official and transparent channels. There are two implications of this. The first is the need to investigate what reasons lie behind migrants choosing the unofficial channels. The second is the need to reduce this flow and expand the official channels. That would enable the government to take steps to improve incentives to send remittances and such that the remitted financial resources may be put to the best possible use for addressing overarching priorities like providing economic security, reducing deprivation and poverty and promoting small businesses and opportunities for sustainable livelihoods. The Economic Impact of Remittances Remittances emanating from international migration have a number of beneficial economic effects. Some of these effects are microeconomic in nature and have direct consequences on the well being of the household that receives remittances. The most obvious being an augmentation of income. Other effects are more economy wide in nature, provided the remittance flows arrive through official channels, and have macro economic ramifications. This section reviews some of the more important potential gains from remittances. Before turning to the economic impact of remittances from migration, it is important we ask the question: Who migrates? One would expect that the skilled and rich people could wish to get away from the lack of opportunity to greener pastures. Or, it could be argued that the desperately poor would migrate so that they could avail of employment opportunities and higher wages. However, evidence reveals that neither of the two extremes in income distribution are the most likely migrants. Initially when migration commences, the most likely migrants come from the middle of the distribution. Migration entails costs, uncertainties and having some rudimentary skill earned through education and adequate physical capabilities. Migrants have to trade-off incentives against real constraints that they may face in going through the entire transaction of international migration. There are some important dynamic implications of this evidence. Over time, if society wishes to leverage the economic benefits of international migration, then the crux of enabling policy interventions has to be the reduction in the risks and costs of migrating. Also, as income increases from very low levels in a country, migration also increases and then at some sufficiently high level of income may taper out. Indeed, there is some evidence to suggest that there could be a switch from a country that sends emigrants out to other parts of the world to one where immigrants come enter as a preferred destination from other parts of the world. Finally, migration flows create networks of migrants and clusters of remittance receiving regions in developing countries. The probability of a region sending migrants is higher if the region already has a number of families or households from where emigration has taken place. There is a kind of regional agglomeration economies in the migration flows. The Macro Effects The most direct economy wide impact of remittances is on the current account of the balance of payments. International remittances have two distinct effects. The first is the



greater availability of foreign exchange resources enhances the ability of the economy to import more essential raw materials or universal intermediates that are crucial for the production economy. These are non borrowed resources and hence can be used for purposes where the immediate gains are not commercial but more developmental in nature. The second impact is the augmentation of the domestic saving rate that remittances provide, adding to the potential flow of investable resources in the economy. In low-income economies the added resources for investment made available without curtailing current consumption is undoubtedly useful. Other important issues on which international migration is expected to have an effect are poverty alleviation and income inequality, productivity in rural agricultural and non-agricultural activities including investments and social sector spending such as schooling and healthcare. The effects could be directly on the remittance receiving family as well as indirectly through induced effects on the local region. Similarly some effects may be short-run in nature, while other effects could be discernable only after some time such as the investments in the social sector. A very significant finding of the research on migration pertains to the impact on inequality and poverty. Remittances into areas from very few have migrated increase inequality while remittances into areas from where many have migrated reduce inequality. Similarly, remittances into areas with low migration rates increase poverty, while remittances into areas with high migration rates reduce poverty. The reason for this result is not surprising. The first stream of migrants comes from middle and upper middle of the income distribution. The remittances sent by them are received by relatively well to do families in the neighbourhood. Thus inequality increases and there is no impact on absolute poverty. As migration increases, the risks and costs decline and poorer families can avail of migration opportunities, remittances begin to be received by poor families and that obviously has to reduce inequality and poverty. So, creating high density migration regions is welfare improving. This has to be a focal point of policy interventions in developing economies. An economy can find remittances a useful way to get resources for investment in development projects. Indeed, many countries are beginning to focus on labour export strategies to boost development. It must be kept in mind that to obtain these resources though, the country has to sacrifice some human resources through migration. The loss of such resources can have adverse short term effects on local economic production. At the household level every household is not expected to be good both at producing output as well as exporting labour. Most households will have an advantage in one of these activities. The solution to this problem is to link the two types of households in the local economy through some resource enhancing schemes such as micro credit. Another significant potential that increased flows of migration bring is the creation of Diasporas that can have enormous positive network externalities in creating greater investment and business opportunities for the country of origin. The long-term benefits that active Diasporas can bring are well documented and discernable in many parts of the developing world especially in Asia. Remittances should therefore be looked upon as



something more than the short-term financial gains that they provide. The long-term potential benefits of a depository of rich experience and knowledge is well worth nurturing. Even when migration is temporary and the migrant returns, he brings back not only some financial capital, but a wide history of encounters with people from other cultures and societies, work experience and business knowledge. International financial remittances, when sent through official channels inevitably involve the financial sector and its institutions like banks. This service produces additional employment opportunities in banks and financial institutions. Networking with other global financial institutions provides excellent opportunities for banks to develop their business skills and their handling of a more diverse portfolio of assets. Financial business experience grows and the general efficiency of the banking sector is likely to be positively affected. In a similar fashion, improving remittance flows by minimizing transaction costs of the remitters entails greater transparency and stronger regulatory frameworks. This will have a beneficial spillover effect on the entire financial services sector. All the macroeconomic benefits discussed above are economy wide in nature and many of them have effects that are visible in the long-term. Hence the importance of a strategic approach to the entire issue of migration and remittances requires a comprehensive policy package. The Micro Effects The microeconomic effects are more direct in the sense that the individual or the household receiving the remittance immediately experiences a rise in disposable income. What is done with the additional income could vary substantially within different income groups and different localities and individual priorities. The priorities could range from increasing essential consumption to increasing non essential consumption, it could imply setting up and financing micro business, it could imply acquiring assets such as land, or investments in human capital such as completion of a family members education and training. Each of these uses of financial resources obtained through remittances clearly has positive effects on the local economy. Any increase in consumption expenditure induces a rise in aggregate demand that in turn, induces additional production and employment. Remittances act as injections of autonomous spending that have a multiplier effect on the local economy. Remittances, moreover, are not related to local economic outcomes and shocks. Hence remittances are truly an insurance against income fluctuations and entitlement failures. The other types of uses are related to more long term benefits in terms of returns that are expected to flow in the future, as in the case of the purchase of agricultural land or the investment in human capital. It is clear however, that households are likely to pursue the best strategies perceived for their welfare. It could be freedom from immediate deprivation and poverty, the meeting of a social obligation or pursuing a plan to increase the flow of future incomes. In every single case the benefits that accrue to individuals and households at the micro level have



a macro counterpart. Governments of low income countries spend a lot of scare resources to promote sustainable livelihoods and reduce the level of poverty and deprivation. Remittances have a very high opportunity cost in the sense that each taka of remittance, liberates a taka from fiscal resources to be spend on alternative ends. This is particularly true when remittances come into households that are more poor and vulnerable. Just as the macro opportunity of benefiting from the externalities of networked Diasporas accrues substantially with the passage of time, the learning for the recipients of remittances is large. The most obvious claimant for receiving remittance from a migrant is his immediate family or next of kin in the country of origin. The relationship between the migrant and his family is private, but it is reasonable to assume that the migrant, through his experiences, bring home a learning that is durable and positive. The possibility of improving ones lot by availing of opportunities and by working hard is not a remote abstract story told by a politician or narrated in the media. It is a living tale of success from which much nuanced learning is possible by the family of the migrant. The value of this learning cannot be underestimated as it may have very durable impact on attitude to work, optimism and the importance of learning from ones mistakes. The negative aspects of a migrants experience are unlikely to be revealed publicly, but may be privately shared within the family. So far we discussed micro effects that unambiguously improve individual welfare and create positive stimulating effects in the local economy. There is also a potential of harnessing remittances (or some part of the flow) to promote community assets in a poor neighbourhood. It is often the case that migrants move out from a particular locality or area, possibly driven by the demonstration effect of initial successful migration from the area. Thus in such cases the recipients of remittances are likely to be living in the same area and closely clustered in a set of activities such as agriculture or handicrafts. It may be a rare case where the clustered recipients collectively decide to use part of their additional incomes to improve local amenities or local infrastructure. Such collective action at the local level is of great significance but these instances are likely to be infrequent and not widespread. The potential is there to be utilized by some strategic incentives that the government may provide to ensure additional resources if such projects are put under consideration for execution and delivery. The design of these incentives and the creation of innovative financial instruments are not easy. But the potential of using remittances as an instrument of community transformation cannot be ruled out. The community improvements have tremendous potential in improving education (such as building new schools, or appointing more teachers) and the improvement of healthcare services and the availability of paramedical personnel. Finally, in the handling of remittances, provided they reach the recipient through official channels such as banks, the externality accruing in terms of improved banking habits cannot be ignored. Quite often, the first experience of new transaction technologies like modern banking facilities or even the use of modern communication facilities such as a cell phone come about through the experience of handling the migration relationship. This creates demand for improved and more modern services. The economic impact of such demand is obvious enough.



Remittances should be viewed in the totality of its impact, including long-term and many non tangible effects. This is important if the migration process is to be viewed as one of the most important source of export earnings in terms of foreign exchange. The migration transaction, beginning from the identification of the potential migrant to the final developmental outcome has to be nurtured and made enduring. The countrys reputation has to be built up patiently as an efficient exporter of labour. The essence of this approach is an optimal mix of international trade and human resource development strategies. The Persistence of Unofficial Channels We have been emphasizing the importance of official channels being used for remitting and receiving international remittances. This is the only way to fully utilize the potential economic benefits from the flow of remittances. However, a number of estimates by monitoring agencies, including the ILO have put the volume of unofficial flows at around 50% of the total. This is clearly too much especially when one considers the macroeconomic gains and the community gains that are foregone. While it may not be realistic to expect that the unofficial channels will disappear altogether, it may be worthwhile to seek answers to the question as to why so many people prefer the unofficial channel so many times. There are a number of reasons, and addressing each of these ought to be part of the overall strategy to increase remittances in general and official channel remittances in particular. The first and arguably the most important reason is the exchange rate premium obtained in the black market. The demand for foreign exchange in the black market is usually linked to illegal transactions such as smuggling, narcotics trafficking and gun running. If the exchange rate premium could be reduced, then the Bangladesh economy would be contributing less to illegal activities and thereby increasing overall welfare and reputation of its economy. Exchange rate management should keep a close watch over the amount of the black market premium. If the premium is substantial and growing, then it may be advisable to review the market valuation of the Bangladesh Taka. There could be another reason why people may prefer the unofficial route. The unofficial service providers are in most cases efficient and user-friendly. The services are provided door to door with promptness and with no paperwork. Many illiterate or just functionally literate migrants may prefer this route where they do not have to fill up lengthy forms and sign in a number of places. The modicum of risk that they take is usually offset by the low transaction costs of such routes. Usually one known person taps a large number of migrants and builds up a reputation in service provision and offers attractive premium on exchange rates. Thus a network is established which may be difficult to dislodge. However, the official agencies would have to take up the challenge in providing low cost services that are competitive with the networks mentioned. This is certainly not impossible, but the initial push has to be very decisive and well orchestrated. It is possible to reduce the unofficial flows therefore, with close exchange rate management and the competitive provision of customized needs across a large cross section of remitters.



The third and final reason why a migrant may consciously choose the unofficial route is when the person is himself in an illegal activity or his status is not fully legitimate. In such cases opting for the official channel may be too risky for comfort. This reason may persist and be difficult to control. This is where cooperative efforts across international borders to prevent money laundering and check the links these monetary flows have with international crime are likely to come in handy. The Migration Transaction It may be useful to review the entire migration transaction beginning from the identification and encouragement of the potential migrant to the optimal utilization of the remittances for development and reduction of poverty. This exercise would be essential in the formulation of a feasible strategy to increase and sustain remittances, and maximize the economic benefits of the process. The first step begins with the understanding of the demographic pool of potential migrants, their age and skill profiles, and their location. Results of research from the study of existing migrants may help to profile the potential migrant better. Care should be taken to match this demographic study with the internal labour market requirements of Bangladesh. This is the supply side beginning of the entire transaction. The next step would be to have a data bank of labour market conditions in other countries that are likely to be countries of destination of migrants from Bangladesh. This data base should not be entirely based on numbers. The requirements of skills and language proficiency should also be mapped. Finally, country specific and job sector specific procedural requirements should be documented and listed. There must also be well constructed training modules for orienting a migrant to the country of destination. It has to be appreciated that when a migrant moves, there are problems of adjusting in new social milieus, labour market dynamics and deeper issues of cultural integration and coexistence. The matching of existing supply to global potential demand in a dynamic fashion is the essence of this manpower mapping. The manpower mapping in both demand and supply dimensions require a clear understanding of procedures, needs as well as individual strategies and preferences of potential migrants. For instance, the migration decision is made by the individual in his capacity as a free agent. The matching of supply to demand cannot entail forcing or coercing any individual to take up a job or go to a location against his wishes. This would jeopardize the macro strategy of enabling the growth of the biggest foreign exchange earning sector. Policy makers and regulators should be sensitive about the fact that dealing with labour market players is very different from exporting commodities or other services. Over and above the planning aspect of the manpower mapping, there is need to ensure as complete information as possible about recruiting agencies in Bangladesh as well as foreign recruiting agencies. Who are to be allowed, and what regulatory requirements they have to adhere to, are decisions that have to be made and communicated in a clear



way. It may be reiterated, that the government must ensure that people moving through official channels are checked, trained, and when they finally go to their foreign employer, the concept of decent work mentioned in an earlier section insisted upon. The long term credibility of the labour export strategy would be critically dependent on these factors. Some Challenges for Adopting a Strategic Approach to Remittance Flows In the description of the complete migration transaction, there are some crucial aspects that will need special attention and effort. These aspects can be broadly classified into two interrelated categories. The first category of challenges revolves round the imperative to reduce risks by providing adequate resources including human capital through education and training. It is indeed obvious that such interventions have social externalities that can spread beyond the migration question. It will also entail legislations and regulatory procedures that are transparent (from the perspective of clear and easy to follow rules), ethically sound (from the perspective of human dignity and rights) and safe (from the perspective of identifying migrants and ensuring that labour export does not get entangled with illegal activities). The second category of challenges revolves round the need to reduce transaction costs. Appropriate financial instruments and institutions have to be designed along with the need to avoid wide fluctuations in the foreign exchange rates. This section briefly discusses the areas of special challenge. One of the most important of these is the systematic reduction of unofficial flows of international money coming into the economy. To achieve the objective a combination of approaches for exchange rate incentives for migrants, an efficient and customized delivery system of remittances door step to door step, and reduction in the demand for foreign exchange for illegal purposes is required. The difficulties in doing these are certainly much less than the anticipated gains. The second challenge is the maintenance and updating of the multi-country multi-sector data bank about global labour markets. Qualitative reports about legal procedures, cultural differences and language proficiency have to be prepared and revised continuously. The data has to be reliable and easily obtained by any who seek information. The third challenge is the identification, screening and regulation of a set of agents, or recruiter agencies both in Bangladesh and in the most important set of countries of destination. Some tie-ups and close cooperation will be essential in ensuing that the Bangladesh citizens get the best deal. International trust is the basis of building enduring business relationships. Bangladesh must gain increasing credibility as a reliable and high quality supplier of labour services. Internal reforms and institution building will be necessary to remove any possibility of exploitation of people by shrewd opportunistic businessmen and any possibly violation of human rights in the country of destination. Innovative use of information technology like superior tracking of individuals and their records are necessary. The challenge of providing enabling services in preparing the potential migrant in acquiring technical skills, language proficiency and cultural awareness of differences is


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